QUESTION: My husband and I use to have a good income. Together we used to bring home about $7,000 per month. However, in 2007, we were lured into refinancing our house because everyone else was making money on their property. I must admit, we spent the money on vacation and unnecessary spending. We were really living the American dream. We travelled every year and even went home to the Philippines 2 years in a row. We charged everything to our credit cards.
We realized too late that we were living on borrowed credit. First the value of our house went down. To complicate matters, my hours at the hospital was cut. Finally, I was laid off. Our income had gone down to $4,700 per month. However, we still need to pay about $2,600 to our first and second mortgage. We are actually paying more than what our house is currently worth. I deeply regretted refinancing my house. We also have about $50,000 in credit card debts, to which we pay about $1,200 monthly.
So far, I have been dipping into my savings to pay off our mortgage and our debts. My 401K from $100,000 is now almost next to nothing! If I can’t find a job soon, we cannot afford to maintain our house. We have two children, who are still going to school. We have cut corners at every expense but we may have no choice but to file for bankruptcy.
I am afraid to file for bankruptcy! I remember, some prospective employers have asked me if I have filed for bankruptcy. Can a company refuse to hire me because I have filed for bankruptcy? We have stopped paying for most of our credit cards last month because we could not afford it. Now, they are calling our house, my cell phone, my husband’s cell phone, and even at my husband’s work. It is very stressful and embarrassing. We are still current with our mortgage, but if I don’t find another job soon, we might lose our house!
Is there any way to lower my monthly payment to our house? Is bankruptcy our only option? I’m afraid to file bankruptcy but all our creditors are at my door. I want a fresh start.
Answer: You have three options, which are not mutually exclusive. First, you can try to modify the loan on your property so that you will pay only 31% to 39% of your gross income. Second, you can try to negotiate with our credit cards one by one or you can consolidate your debt. Third, the most drastic option is for you and your husband to file for personal bankruptcy under Chapter 7.
Please note, that you can always do the first option no matter what. You need to submit a hardship letter, proof of your current income, bank statements to the lender and try to work out a loan modification agreement with them. We can help you coordinate your documents and prepare your financial statements so that the bank will lower your monthly payments.
You can either negotiate with your credit cards or file bankruptcy. Bankruptcy is a more drastic solution, but it will allow you to walk away from your unsecured (credit cards) debt. Upon filing your bankruptcy petition, by law, all the creditor are prohibited from contacting you. They can not even send you a bill. This will give you a respite from all the stress and phone calls. Under the law, companies cannot discriminate against an employee who had filed for bankruptcy. If asked, you must however, disclose the fact that you had filed for bankruptcy. Nevertheless, filing for bankruptcy now, will allow you to walk away from $50,000 worth of credit card debts. This will give you and your husband a fresh start so that you can start saving again for your retirement.
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If you have any impending foreclosure, please call our office at 213-639-3888 or e-mail us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Our office is located at 3699 Wilshire Boulevard, Suite 720, Los Angeles, California 90010.
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This article does not constitute any legal guarantee or advice for any individual matter and does not create attorney client relationship with the readership.
( Published October 5, 2010 in Asian Journal Los Angeles p. C5 )
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